Agreement Will Require Revision of Gateway's 2005 Net Income to Account for
Payment Attributed to Prior Years
Agreement Also Ends Ongoing Legal Dispute Over Mutual Patent-Infringement
Allegations
IRVINE, Calif., March 1 /PRNewswire-FirstCall/ -- Gateway, Inc.
(NYSE: GTW) announced today an agreement with the Hewlett-Packard Company (HP)
to cross-license each other's patent portfolios for a period of seven years.
As part of this agreement, the companies also reached a global settlement and
mutual release of all claims in litigation against the other company.
Under the binding term sheet, Gateway will pay HP $47 million, $25 million
to be paid within seven business days following the execution of a definitive
Settlement and Cross-License Agreement, and $22 million a year after that
date.
Gateway has attributed $16.7 million of the $47 million to resolving,
without admission of fault, allegations of past infringement in connection
with PCs made from 1999 to the present. The remaining $30.3 million will be
attributed to the seven-year cross license.
As a result, Gateway will revise its results for the quarter and year
ended Dec. 31, 2005 to take a charge of $16.7 million. Gateway will revise
its previously announced net income for 2005 from $49.5 million to $32.8
million or $0.09 per diluted share. Such results will be reflected in
Gateway's 10-K for 2005, which will be filed in the next two weeks.
The licensing fee of $30.3 million will be amortized over the seven-year
life of the license, and those costs are substantially less than the near-term
litigation costs that will now be avoided. Gateway estimates the agreement
will cost $4.3 million annually over the next seven years. For 2006, Gateway
expects to save approximately $12 million in budgeted litigation costs that
will now be avoided.
About Gateway
Since its founding in 1985, Irvine, Calif.-based Gateway (NYSE: GTW) has
been a technology pioneer, offering award-winning PCs and related products to
consumers, businesses, government agencies and schools. After acquiring
eMachines in early 2004, Gateway is now the third-largest PC company in the
U.S. and among the top 10 worldwide. The company's value-based eMachines
brand is sold exclusively by leading retailers worldwide, while the premium
Gateway line is available at major retailers, over the web and phone, and
through its direct and indirect sales force. See http://www.gateway.com for
more information.
Special note
This press release contains forward-looking statements that involve risks
and uncertainties, as well as assumptions that, if they do not materialize or
prove incorrect, could cause Gateway's results to differ materially from those
expressed or implied by such forward-looking statements. All statements,
other than statements of historical fact, are statements that could be
forward-looking statements, including any projections or preliminary estimates
of earnings, revenues, or other financial items; any statements of plans,
strategies and objectives of management for future operations; the extent of
seasonal changes in demand; any statements regarding proposed new products,
services or developments; any statements regarding future economic conditions
or performance; statements of belief and any statement of assumptions
underlying any of the foregoing. The risks that contribute to the uncertain
nature of these statements include, among others, risks related to shifting
our distribution model to third-party retail; competitive factors and pricing
pressures, including the impact of aggressive pricing cuts by larger
competitors; general conditions in the personal computing industry, including
changes in overall demand and average selling prices, shifts from desktops to
mobile computing products and information appliances and the impact of new
microprocessors and operating software; the ability to simplify the company's
business, change its distribution model and restructure its operations and
cost structure; component supply shortages; short product cycles; the ability
to access new technology; infrastructure requirements; risks of international
business; foreign currency fluctuations; risks relating to new or acquired
businesses, joint ventures and strategic alliances; risks related to financing
customer orders; changes in accounting rules; the impact of litigation and
government regulation generally; inventory risks due to shifts in market
demand; the impact of employee reductions and management changes and
additions; and general economic conditions, and other risks described from
time to time in Gateway's Securities and Exchange Commission periodic reports
and filings. Gateway assumes no obligation to update any forward-looking
statements to reflect events that occur or circumstances that exist after the
date on which they were made.
SOURCE Gateway, Inc.
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Related links:
http://www.gateway.com
CONTACT:
Media, David Hallisey, +1-949-471-7703,
david.hallisey@gateway.com, or John W. Spelich, +1-949-471-7710,
john.spelich@gateway.com, or Investors, Marlys Johnson,
+1-605-232-2709, marlys.johnson@gateway.com, all of Gateway, Inc.
NOTE TO EDITORS: NEWS MEDIA & ANALYST WEB CAST TODAY, March 1 AT
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